Capitalism Hits the Fan

One striking feature of a profound crises is that it is often the catalyst for the convergence of what would otherwise be contending lines of thought. In more tranquil times, the Georgist, the distributist, the mutualist, the “libertarian socialist” and so forth all have leisure to pick holes in each other's coats. But when things seem to be falling apart, the opponents of the system may find that they have more in common with each other than would otherwise be apparent.

Those trapped in the system remain clueless. The stock market, that bastion of cluelessness, rises three percent on a day that job losses of 600,000 are announced (really, more than 700,000, when “seasonal adjustments”—political manipulations of the numbers—are taken out.) The grounds for the market's optimism are unclear, but seem to be related, so the pundits assure us, to hopes for a general Bailout of Everything and Everybody by the state. Politicians debate endlessly the “stimulus” of the economy without ever asking whether there still exists an economy to stimulate. Indeed, the oft-heard statement that “70% of the economy is in consumption” doesn't strike our chattering classes as the absurdity it patently is. The only things that such a statement can mean is that we consume far more than we produce, and will soon end up producing and consuming very little. Why anybody would want to “stimulate” such an economy is beyond me. The major reason they think this way, I suppose, is that for the last 30 years they have been able to stimulate it, but only at the cost of unrepayable debts and an ever-weakening productive sector. Further, each round of “stimulus” has been both more expensive and less effective than the last; even small achievements cost more dollars. Eventually, we must come to a point—and we seem to have already come to that point—were we will spend everything to achieve nothing.

Clearly, the economy doesn't need stimulus, it needs to be restructured. The distributists and their allies already know how to do this: a great number of small owners of capital are better a few owners of large capitals; small scale better than the gargantuan; cooperatives better than anonymously-owned corporations (see Buy it Out! Break it Up! Fund it Right!)

However, there is one group that has been slow to join any real movement for reform. This is the group which many call “socialist,” but in fact are really “liberals” or “progressives,” or whatever name is now fashionable. This kind of liberalism has become, if anything, more wedded to the current system than even the hardened capitalist. After all, the capitalist wants socialist access to the public purse whenever he finds himself in need, which he usually does. The Liberal wants a “reform” of the system, which usually means no more than more regulation and higher taxes. This has to do with the history of English and American socialism, which become “Fabian” at the beginning of the 20th century. The Fabians sought merely gradual changes without fundamental reform. As Belloc predicted, this would lead to a merging of the capitalist and socialist ideals into The Servile State: the corporate and state bureaucracies would become responsible to the welfare of the people, who would increasingly lose any real economic freedom.

The capitalist has always been comfortable with this arrangement. The regulations had the effect of keeping down competition, since they were a mere annoyance to a large corporation, but a crippling barrier to a small start-up. Hence, they get security of profit along with power and influence; their position becomes more entrenched, not less so. And if they get into trouble, as they frequently do, they can themselves become the objects of public charity and welfare, but at a much higher level than the average welfare mom.

Another group that has been AWOL in this struggle is the Marxists. The Marxists do want fundamental change. However, it is a change in the direction of even fewer owners, not greater. Indeed, there will be only one owner, the state; it is really just capitalism on steroids. Marx, for all his blather about the proletariat, never really trusted the working man to run his own affairs; he would always need a dictatorship to direct even the minutest of his actions. Further, Marx was a great admirer of capitalism; he loved its gargantuan scale and its terrifying power, and especially its power to replace religion as the focal point of men's lives. So we wouldn't expect much help from that quarter.

However, some Marxists take the theory in a different direction. These are the “Marxians,” which seems to refer to a Marxism stripped of its revolutionary and political ideology and its statist assumptions. The odd thing about this “Marxianism” is that it more resembles pre-Marxist socialism than Marxism, a “socialism” that was also anti-statist. The pre-Marxist socialists blamed the state for the vast accumulations of property that made the corporation the dominant economic and political institution; only the police power of the state could guarantee such an unnatural accumulation. Pre-Marxist socialists like Proudhon wanted to see an end to the state as a means to ensure a more equitable division of ownership, an ownership based on actual use of the land rather than legal convention. Indeed, Marx's “withering away of the state” is really just a sop to the non-Marxist socialists of his day.

An excellent example of the “Marxian analysis” comes from Richard Wolff, a professor of economics at the University of Massachusetts. Professor Wolff has an excellent lecture, Capitalism Hits the Fan, which offers an analysis of “the root causes of today's economic crisis, showing how it was decades in the making and in fact reflects seismic failures within the structures of American-style capitalism itself. Wolff traces the source of the economic crisis to the 1970s, when wages began to stagnate and American workers were forced into a dysfunctional spiral of borrowing and debt that ultimately exploded in the mortgage meltdown. By placing the crisis within this larger historical and systemic frame, Wolff argues convincingly that the proposed government “bailouts,” stimulus packages, and calls for increased market regulation will not be enough to address the real causes of the crisis - in the end suggesting that far more fundamental change will be necessary to avoid future catastrophes.”

What are these "fundamental changes" that Wolff calls for? It is nothing less than the belief that the worker rather than the capitalist ought to own the means of production, and own it directly, unmediated by the state. But at this point, the difference between the “Marxian” and the Distributist becomes a matter of the means rather than the ends.


Market Meltdown 101: Richard Wolff on Economic History from Amherst Wire on Vimeo.

Market Meltdown 101: Richard Wolff's Alternative Proposal from Amherst Wire on Vimeo.

We can note how Wolff's conculsions track with John Paul II's in Laborem Exercans:

But this socialization of property cannot be achieved by merely eliminating private property, which would simply take the means of production out of the hands of one group of people and put them in the hands of another group (68). We can say that property is properly socialized only “when on the basis of his work each person is fully entitled to consider himself part owner of the great workbench at which he is working with everyone else” (69).

We can also consider Pope Bendict's rather surprising praise for the Post-modernist and Marxist Frankfort School in Spe Salvi (See Post-Modernist Pope).

The days ahead will be difficult, no matter what happens. Almost anything is possible, and most of the possibilities are unpleasant. Those who wish to see a rational and peaceful restructuring of the economy must be constantly on the lookout for allies. The powers that be will not give up power easily, and in their unease there is no telling what they may do.

Incidentally, some of the more vociferous critics of the film are old-line socialists, who see in Wolff's work a mere call for syndacalism, which is also an ally of Distributism.


Besorge Sunday, February 8, 2009 at 12:46:00 PM CST  

I am a big fan of this Blog site, I think it is the best to truth you can get on the ideas of how an Economy really works, but the biggest problem I have is the use of the term Capitialism that I keep seeing. Every type of system assumes Capital, and Marx who coins the word Capitalism is a failed Economic theorist, as he really has a poor phenomenological understanding of how Free Market, the actual term works. It might have to do with the fact he never worked a day of his life.

I really wish for two things, I wish Distributism was called something else, because every time I mention it I have to spend 30 minutes convincing people it is not redistribution of wealth, and for people to stop using the term Capitalism, like it was a credible term is economic theory.

Capitalism and Marxist Socialism or Communism are false dichotemies. The proper termenology is Free Market, and Distrubutism falls under the idea of Free Market. In fact I believe it is the best way for a Free Market to exist. I know G.K. has been the one sought to have coined the term Distributism, and I know he mentions Capitalism a lot, but that does not mean necessarily that Capitalism is real. Especially since he comes from a British understanding of Economy which lacks Catholic influence, and also understands Freedom as limited to "liberties" which is also a common way of seeing things here in America too. But the reality that exist is that the two battles are really between Free Market and Socialist/Communist theory of economy. Capitalism is an incorrect interpretation of terms, especially since China/Vietnam/The Former Soviet Union/Cuba, so on and so forth assume the necessity of capital for them to function. I have yet to see an economic state that does not wish to employ wealth, I think the idea is fantastical, and mere illusion and lacks any real presence in this reality.

Viking Sunday, February 8, 2009 at 2:10:00 PM CST  

Hi SHOMP,as I'll call you. (Btw, you misspelled "medieval", tho it does look more pious with the "dei".) You make some excellent points, but it seems to me that the problem with the term "Capitalism" is the opposite of what you've said. That is, not that it's nowhere, but that it's everywhere. Capitalism presumably refers to the fact that the owners of it control the whole enterprise, at least in theory. This is particularly true of Communist countries, where the state owned all the capital and ruled the economy. That's why I've asserted, contrary to John Medaille, that they were the true state capitalists.

Many Distributists agree with you on the change of name, which is why we had a discussion just a little earlier on this blog about that. Many, ahem, creative ideas came out of it. My own feeling is that the name's fine, the problem's that so few people have heard of it.

John, do you think that syndicalists are really our allies? Their belief, as I understand it, is in a single group of workers (union) which controls each single industry, rather than various firms within an industry each being worker-owned, but only those who worked at the firm. That seems to me to make a huge difference. And yes, I'm aware that a contributor to this blog seems to believe in precisely what I'm here expressing skepticism to.


Besorge Monday, February 9, 2009 at 12:34:00 PM CST  

Sorry about the name, it is registered on that because of a book I read, and for some weird reason, Google decided my screenname would be that. I am trying to figure out how to change that.

Besorge Monday, February 9, 2009 at 12:39:00 PM CST  
This comment has been removed by the author.
Besorge Monday, February 9, 2009 at 12:42:00 PM CST  

There I was successful on the sn change...anyways, I am aware of the fact Socialist/Communism is where the state/government assumes hold of the capital, but Capitalism is a Marxist term developed from the erroneous idea of dialectical materialism. I know what is trying to be said, so that is why I agree with the many ideas of G.K and distributism's many authors. Unless some how Distributism evolved from the idea of Marx's dialectic, I see it as not very scholarly to use the term Capitalism as we are dealing with a word that is not in agreement with the way a Distributist sees the world.

Viking Monday, February 9, 2009 at 8:06:00 PM CST  

Hi Besorge,

I presume you were SHOMP before, is that correct? Anyway, I agree that "Capitalism" is a highly loaded term, but there, as with "Distributism", we just have to tell people why it may be misleading. (Incidentally, I'm not sure how you could have Distributism WITHOUT some re-distribution at least.) But to return to the term Capitalism, it's called that because, at least in theory, those who own it control the company. I happen to think, therefore, that we could continue using the term Capitalism, but with three different varieties. What's now called "Communism" could be styled "State Capitalism" (as previously suggested), our current form could be called "Absentee C.", and Distributism could be renamed "Worker C.". This is assuming, of course, that for the last we'd find it best to de-capitalize the very rich and capitalize the large majority. (Btw, I find the idea that most investors,even when they have a majority of the common stock when added together, have much say over the workings of the firm fairly dubious, so the Absentee Capitalism is perhaps the most misleading of the three terms.)

However, another possibility exists, one which I favor. The reason that the people who own the capital control the enterprise is because said owners take the surplus after all necessary expenses are paid. If another group had control but gave the capital owners only the surplus, the other group might see to it that there was little or no surplus, and good luck attracting additional capital with that as a possibility! But there is no reason why the capitalists couldn't instead get a fixed amount (or a variable one depending on current rates of interest, providing it were done impartially), with the workers getting the surplus, and therefore the control of the company. This would have two advantages. One, the firm would be able to attract new capital without, in effect, taking up a collection from present workers there. Two, the workers themselves wouldn't be either forced to donate the same or a similar amount each, or else have the workers who contributed more demanding more say in the enterprise. So, with this non-Capitalist way of organizing our workplaces, I'm inclined to retain the word Distributism.


Kevin Carson Tuesday, February 10, 2009 at 10:34:00 PM CST  

"Clearly, the economy doesn't need stimulus, it needs to be restructured."

Yes! I'm amazed at all the "Progressives" out there enthusiastically endorsing this stimulus on Keynesian grounds, who seem to have no object in mind but restoring mid-20th century Consensus Capitalism. These are the same people, ironically, who lionize Al Gore and pursue fashionably greenwashed upper-middle class lifestyles. They probably also say the expected things about consumerism and planned obsolescence, as well. Absolutely amazing that they don't put them together.

News flash: there's simply no way to restore America's overbuilt industry to running at full capacity *without* pathological levels of waste, planned obsolescence, and consumer debt to buy worthless crap.

Besorge Wednesday, February 11, 2009 at 7:06:00 AM CST  

Thanks for your comments, I agree with you in most part, and well I am not going to fixate on the term, I just thought perhaps a strong enough philosopher would investigate your arguments one day, and fail hermeneutically because he failed to realize in what way you were speaking about Capitalism. Anyways, carry on, I enjoy the many articles in this blogsite and I am very proud to call myself a Distributist in ideal and among Distributist themselves, for you guys seem like you can think and you give a shit at the same time. Those are rare qualities. =)

Viking Wednesday, February 11, 2009 at 11:23:00 PM CST  

Hi all, especially Besorge & Kevin,

Interesting remarks, Kevin. Besorge, were you addressing Kevin or me in your last post? I presume him, but just want to make sure. If my presumption is correct, would anyone like to make some comments on my proposal, even if deeply negative ones?


PS Does anyone else have trouble getting your comments published? Seems like I always have to give the addy and password at least twice, and this last one actually swallowed it.

John Médaille Wednesday, February 11, 2009 at 11:40:00 PM CST  

Besorge, Systems are usually named from their most prominent feature, usually the property relationship. Hence feudalism, with property held in fief, Socialism, held "socially", distributism, widely distributed, etc. Capitalism, although originally a Marxist perjorative, fits well the system where capital in the hands of a few dominates the political, social, and economic structures.

Viking, you are correct. From the standpoint of microeconomics, there is no difference as to who the "residual claimant" is. Capital can hire labor to keep the surplus, or labor can hire capital. From the standpoint of macroeconomics, it makes a great deal of difference, since wealth it better distributed in the later system, and hence the economy is more stable and less prone to speculative bubbles.

I would not worry about attracting capital. 90% of expansions are financed from retained earnings, with the capital markets serving mainly M&A and buy-backs. That's a rather odd feature of the capital market, since we tend to think that expansion depends on them, when it doesn't. Mondragon is financed without a cent of outside capital, for example, but in truth that is not out of the norm for a big company. IOW, the vaunted capital markets do not contribute that much to business expansion. Which means their importance is overrated.

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